This information is based on Nevada law and may differ in other States. Dealing with troubled Real Estate can be demanding, profitable, risky and rewarding. Someone thinking about Buying a distressed property or Selling their home that is or is going into Default should be fully prepared and knowledgeable into the positives and negatives of their decisions. You should have, at a minimum, the assistance and guidance of a professional Realtor that has experience in dealing with properties in this type of situation. The potential for realizing a significant profit is very good in downward or upward markets as long as you have a knowledgeable Realtor assisting you or you have the appropriate knowledge and expertise to be able to weave through all the potential problems that can and usually do arise in this type of transaction. The advantages to buying properties from homeowners in default can only be measured by the individual investor. Some do not see enough reward, some think it's too risky, while others are plagued by moral issues. Are you helping the troubled homeowner or taking advantage of his misfortune?  The advantage to a homeowner to sell their property prior to losing it at auction is significant and can sometimes be the difference between having to rent for the next 5 years or so, or be able to purchase another home within a short while if not immediately. Both the lender and the homeowner can lose in a foreclosure action. Neither want it to happen and the focus must be toward a Win/Win situation for all parties involved. Both parties must be motivated to resolve the situation and is the main key to the process.

The first public investing window of opportunity opens the day the Notice of Default or Breach is filed. This lets the homeowner and the general public know that the homeowner has Defaulted or Breached the terms of their Mortgage and needs to make good on the loan, by bringing it current or paying it off completely. The window closes the day the property is sold at auction. The time between these two events enables an investor to work with the homeowner and lender to create a workout strategy or a purchase of the property from the homeowner before the sale date.

The amount of time the window remains open depends solely on state and local laws, as well as the behavior of the property owner. The behavior of the property owner with the Bank is one of the most influential items in just how the Bank is going to deal with the current property owner. Several options are available from the Bank to homeowners such as modifying the current loan, foregoing past payments, adjusting interest rates and payment amounts. Maintaining an open line of communication between the homeowner and Bank can be difficult at times and it usually is best to utilize one of the newest emerging specialties the Loss Mitigation Consultant. The Loss Mitigation Consultant is a third party that helps bridge the gap between the homeowner and bank. They can assist in preparing and analyzing which options are truly best for all parties involved and can be the key to a homeowner selling the property and saving their credit rating. Nevada sells properties within 90-120 days from the first notice of default.

As for the moral question, keep in mind that by dealing with a homeowner in default, you not only help him, you generally rescue the loan and maintain the value of the property (and surrounding properties) as well. If there is enough equity in the property, there is the potential to work out an arrangement that satisfies all parties and allows for a handsome profit. That's what pre-foreclosure investing is all about: buying the equity in the property, working out an arrangement with the lender and the homeowner, then selling the property for a profit.

Following theses basic guidelines should ensure a successful purchase and sale:

1. Locate loans in default
2. Evaluate choices and narrow selections
3. Contact homeowner
4. Inspect property and loan documents
5. Determine homeowner's needs
6. Calculate your selling price and profits
7. Negotiate with lender, owner and lien holders
8. Close the deal
9.  Repair as necessary and sell

Part 2
 

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